Yoshida in China: Probing Apple's U.S. manufacturing gambit

It remains to be seen how much actual work will result from Apple's plan to bring back some production to the U.S. from China. So how do we get from goodwill to jobs?

NEW YORK – At the beginning of this year, we launched a series called "Rebuilding America" in which we attempted to explore the prospects for reviving U.S. manufacturing. We acknowledged at that time that we could be accused of beating a dead horse since many in the electronics industry favor the outsourcing of manufacturing to Asia as a way to reduce costs.

Beyond that is the reality of globalization and what has been called the global "fragmentation of production." Still, we argued, the engineering importance of "making stuff" as a way of understanding the product design process can't be underestimated.

With that in mind, you have no doubt heard about Apple’s plan to spend more than $100 million to bring back “some production of Mac” to the U.S. from China. If you’re like me, you probably rolled your eyes and said, “Yeah, right!”

A healthy dose of skepticism is in order here.

First, what’s Apple’s business case? Setting aside the goodwill Apple has already gained from media coverage, we need to ask whether it actually makes sense to manufacture Macs at home.

We need to see a cost analysis. What’s the labor cost? What’s the shipping cost for finished products? Do we still have a supply-chain infrastructure capable of bringing all the components necessary to make Macs here and deliver them on time? What’s Apple's operating margin for this product line? How much will it cost to operate a U.S. factory?

We need to know the cost structure for moving in-shoring "some" production. Corporations frequently use cost as the alibi to ship jobs overseas. If some manufacturing jobs are returning, we must understand the business case for such a move.

Apple CEO Tim Cook, in interviews with Bloomberg Businessweek and NBC's Brian Williams disclosed none of these details. Cook never revealed the actual products Apple will be making in the U.S. or how many Apple expects to make.

Cook vaguely suggested producing some Mac computers here "beyond the assembly work" it already does stateside. Cook’s statements implied that Apple will have "partners.". For instance, he told Bloomberg Businessweek that the plan “doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”

Again, what “people”?

So far, all we’re looking at is a symbolic gesture by Apple -- just in time for the holidays.

A little disappointed at the low level of insight shown in this debate. Would toss out a few obvious points from a BA perspective;
1) It is normal to evaluate/re-evalute your manufacturing cost structure periodically.
2) The MAC line are "high-end" computers.
3) The Chinese labour market cost increases are well documented.
4) The beginning of a new product cycle is an optimum time to change manufacturing dynamics/process
5) A high percentage of high end computer consumers (Graphics/film etc) are in the US.
I could go on, however, it would seem that this, is an ideal time to announce something that has been in the works for many years i.e. bring high end highly configurable products nearer to end users using new manufacturing machinery and methods, solving logistical problems and without cost penalties. Ergo, logical business process.

Junko, one thing I notice is (& am not sure if others here drew the same parallel) there are many good lessons to draw from Automobiles manufactured in the US, including some of the pricey models (like BMW's in Tennessee). Granted we are comparing apples to star fruits(!), I believe there are good manufacturing practices that can be emulated to get the 'high' labor cost out. As others have pointed out, manufacturing consumer electronics products is an art. It is high time US perfected that art!
MP Divakar

I start to have a feeling that china is THE heaven chosen place for mass production.
(kinda like abrabs are the chosen place for oil reserves, so they can focus on prayers...)
1. population 1.3 billion...
2. industrious.
3. safe society, chinese folks are peace loving, mild. so they can get packed in high density, economic scale.
4. lacks higher level wisdom to get em into higher margin business (0 nand , 0 cpu)
5. u name it...

Being able to manufacture a consumer product is a real art and science. There can be a range of skill levels involved. Having that range of skills in the U.S. further diversifies our economy and gives it a greater richness and strength. I would hate to see all electronics manufacturing move out of China, just as I hated to see a lot of it move out of the U.S. I think the electronics industry is something that all countries can participate in both to their benefit and to the world's benefit.

"The only way the average American can make more money is to give them a product to sell."
I don't think that's right. People make money when they add value to the economy. And they make MORE money if they add more value than the average "other guy." "Add value" means doing whatever it is that the economy wants. You do that better than most others in the field, and/or you do something in demand that few others have mastered, you make more.
So in principle, if all we did was generate IP, and of course all the other more menial local jobs, that theoretically should be enough.
The problem is, the Chinese aren't stupid, right? If they do the manufacturing, what's to say they can't also generate IP? So we need to diversify. That's my take.
China and India are gymongous. It stands to reason, there is a LOT of talent there.

yeah right, not all americans losers with this game rule.
there are 10-30% americans are losers though, those who want to occupy everything.
those who don't have a decent degree or gift to fit in the higher value part of apple chain.
they are staving or freezing to death now.
you all better come up with a solution.

You can't sell without a product and a customer. The US as a customer is declining. The more people that struggle to make ends meet, the less they buy. Unless we come up with a way for the average American to make more money, we will fail economically, and our failure will bring down much of the world. The only way the average American can make more money is to give them a product to sell. It is simple economics. If we send our money overseas by buying things made there, we must also bring it back by selling things there that were made here. If we don't, our money will leave and lose value. We will have less, and it will be worth less.

Or to put it another way: the fact that it is uneconomic to make stuff in the US is surely a good thing? Would you rather the economy of the US was more like that of Turkey/Vietnam/China so that it was economic to make stuff in the US?

Who makes more money? Apple or Foxconn? Manufacturing is the part of the process where it's hardest to add value and compete. Apple keeps in house in the US the parts of the process where most value is added (design, marketing, selling) and outsources the part where least value is added (the manufacturing). I find it curious that it is assumed by everyone here that moving the manufacturing back to the US is automatically "a good thing".

PR stunt or not, further rumors have pointed to the Mac Pro as the Apple machines. These are big suitcase sized desktops - or rather, desksides - used by animation studios and such. Not high volume but often some customizing involved. My wild guess (and this is totally guessing) is that Apple may be experimenting with robotics for customizing special order machines, where standard boxes must now be opened up and modified by hand.